The Partners of Apple, Bere, and Carroll LLP Share Net

question 49

Multiple Choice

The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2013, were as follows: $$\begin{array} { | l | r | } \hline \text { Apple, capital } & \$ 25,000 \\\hline \text { Bere, capital } & 75,000 \\\hline \text { Carroll, capital } & 50,000 \\\hline \text { Total partners' capital } & \$ 150,000 \\\hline\end{array}$$ The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:

• A)$25,000.
• B)$30,000.
• C)$37,500.
• D)$75,000.
• E)$90,000.

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Definitions:

Zero Economic Profits

A situation in perfect competition where firms earn just enough revenue to cover all their costs, including opportunity costs, indicating no supernormal profit above the normal rate of return.

Long-Run Equilibriums

A state in which all factors of production and market forces are balanced and economic variables are not expected to change.

Implicit And Explicit Costs

Implicit costs are the opportunity costs of using resources that a firm already owns, while explicit costs are direct payment outflows for purchasing productive resources.

Differentiated Products

Goods or services that are distinguished from one another by quality, features, branding, or other attributes that consumers may perceive as unique or valuable.